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Building a Tier I European Player in Consumer Financing

Building a Tier I European Player in Consumer Financing. R affaele Cicala – General Manager. London, October 10 th 2007. AGENDA. Who we are Our presence in Italy Main challenges in the Italian Market. Our ambition Building a Tier I European Player in CF

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Building a Tier I European Player in Consumer Financing

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  1. Building a Tier I European Player in Consumer Financing Raffaele Cicala – General Manager London, October 10th 2007

  2. AGENDA Who we are • Our presence in Italy • Main challenges in the Italian Market Our ambition • Building a Tier I European Player in CF • What we have done over the last 12 months • Playbook 2008

  3. AGENDA Who we are • Our presence in Italy • Main challenges in the Italian Market Our ambition • Building a Tier I European Player in CF • What we have done over the last 12 months • Playbook 2008

  4. 12 88 1,973 4,444 893 2,893 834 160 24 11,715 138 922 864 10,005 661 Market Player # 2 UCFin Personal loans Automotive POS Credit cards LoS UNICREDIT CONSUMER FINANCING(1): PRESENT POSITION IN ITALY • 4.6 bn total outstanding loans, mostly on personal loans and revolving cards to captive customers • New flows: UCFin growing 20% y/y, outpacing market and main competitors 31,028 +17% y/y 3,124 +2% y/y 2,649 1,949 +20% y/y +11% y/y LoS(2) Credit cards 699 POS 562 Automotive 634 Personal loans 1,230 Player # 1 Source: UCFin interim report and Assofin data as of 1st Half 2007 (2) Loans on salary (1) UniCredit Consumer Financing (UCFin) is the new corporate name that UniCredit Clarima Banca will start using in February 2008. Even if the current corporate name is still UniCredit Clarima Banca, in this presentation the new branding is used for simplification purposes

  5. MAIN CHALLENGES AND OPPORTUNITIES IN ITALY • Build positions in • Car financing • LoS • … to address relevant market segments • … to increase cross-selling opportunities • Complete integration of Capitalia business into UCFin… • … to enlarge captive customer base • … to exploit clear customer penetration opportunity Personal loans penetration * Revolving cards penetration * 9.0% 13.6% 6.1% 4.7% UCB CAP UCB CAP * On Mass Market + Affluent customers

  6. AGENDA Who we are • Our presence in Italy • Main challenges in the Italian Market Our ambition • Building a Tier I European Player in CF • What we have done over the last 12 months • Playbook 2008

  7. BUILDING A TIER I EUROPEAN PLAYER IN CONSUMER FINANCING: UniCredit current position in Consumer Financing Tier II Tier I Cetelem (BNPP) Sofinco (CA) SCF (Santander) SoGen UCI ~13 16 ~6 ~15 9 ~8 ~47(1) 25(2) ~51 ~30 10 ~37 ~31 ~11 ~13 Outstanding loans (Bn €) Countries of presence Mln customers (1) Including Cofinoga (2) Of which 17 in Europe

  8. BUILDING A TIER I EUROPEAN PLAYER IN CONSUMER FINANCING: The ambition … to a Tier 1 European player in the next 5 years setting up foreign branches or subsidiaries From a purely domestic player… Foreign branches • Germany • … • … Subsidiaries • Bulgaria • … • …

  9. BUILDING A TIER I EUROPEAN PLAYER IN CONSUMER FINANCING: Our strategy • Leverage existing assets in countries where the Group has a strong retail base • Consolidate business from retail banks • Increase specialization to enhance risk management and Customer Value Management on ~40 mln customers (1) • > 9,000(1) branches to create in-branch corners • Selectively develop alternative channels to accelerate new clients acquisition (global partnerships, third party networks, direct channels) • Develop POS financing especially in faster growing CEE with weaker UCI retail positions (1) Including Capitalia and ATF Bank (Kazakhstan)

  10. BUILDING A TIER I EUROPEAN PLAYER IN CONSUMER FINANCING: Our products & markets focus Revolving Cards 2 2009E stock, Euro bln • Add on across markets/channels 180 119 88 32 21 12 9 Revolvingcards 3% 3% 5% 14% 14% 16% 20% POS and Automotive financing 25% 40% 41% 20% 33% 36% POS/Automotive 3 50% • Selectively by market Personalloans 70% 60% 57% 56% 53% Personal loans 50% 1 34% • Core Business • Focus on captive Germany Italy Russia Austria Ukraine Poland Romania Source: UCFin, Eurofinas, ING, NBP, National Banks, BCG Analysis

  11. WHAT WE HAVE DONE OVER THE LAST 12 MONTHS • Strong boost of Italian operations • Developed new countries • Developed global platform, competencies and organization • “Clarima” Rebranding • …while boosting economic and financial results

  12. WHAT WE HAVE DONE OVER THE LAST 12 MONTHS: Strong boost of Italian operations  Organization • Focus of organization, as reference platform  • Enhancement of risk management supported by new tools (for decision, monitoring, collection) • Creation of larger collection factory • Improved existing IT platform to support new processes (credit, CRM, commercial) • Cost reduction by improving processes efficiency  Processes   • Launched 5 new products (Top, First, SB auto financing, auto insurance, new insurance cards)  Products  • Optimized CVM on captive client base Captive Channel  • Created 226 specialised corners within UCB branches

  13. WHAT WE HAVE DONE OVER THE LAST 12 MONTHS:UCFin Italy focus of organization CHAIRMAN Board of Directors GENERAL MANAGER Direct Marketing & CVM Legal & Corporate Affairs • StaffCredit-Dep Cont Bud & R • Underwriting • Credit Policies, Monitoring & Tools • Credit data Quality & Fraud Risk • Workout Human Resources Credit Planning, Administration and Risk Management Operations Loans on Salary Business Captive Business Non Captive • Co-branding • Third Party Networks • Regional Areas • Key Account Automotive BoD 10-9- 2007: NEW ORG CHART

  14. WHAT WE HAVE DONE OVER THE LAST 12 MONTHS: New countries developed • GERMANY: • Set up of UCFin German Branch, in March 2007, revolving cards (new product for HVB) launched in the captive channel • Full roll out of revolving cards in all HVB branches after pilot successful • Personal loans in captive channel under development • BULGARIA: • NewCo, co-owned by UCFin and Bulbank, set up in 2006, 2% market share in PoS financing • Developed and successfully tested CF Corner in 5 Bulbank branches with full UCFin advertising and processes allowing over 50% new client acquisition. Accelerated plan for opening up to 100 corners under development (Gold, Bronze, Silver) • OTHER EUROPEAN MARKETS: • Assessment of market potential and business model in core UCI markets • Targeted launch of 2-3 markets set for 2008-2009 • Personal loans and POS/Automotive financing as first products to be introduced, revolving cards to follow

  15. WHAT WE HAVE DONE OVER THE LAST 12 MONTHS: Creation of a global platform • CREDIT RISK • Processes and tools re-designed for global expansion • GLOBAL IT • Set up of a dedicated team within UGIS to serve UCFin needs • CAPABILITIES BUILD UP • Major recruiting effort undergoing, with addition of global talents from Group and external specialists • Strengthening of skills in Operations, HR, CRM, CRO and CFO family in progress • Business Development team strengthened

  16. WHAT WE HAVE DONE OVER THE LAST 12 MONTHS: Global organization structure and governance Board Governance • Corporate center, reporting to GM, with responsibility to steer, coordinate and control operations • Management system based on • 2 “competence lines” and • 3 “core platforms” • 3 geographical areas GM Management Committee Corporate Center HR CRM Risk Management Finance Business Development IT/OP. GAP CEE Italian Market • Germany • Poland • Austria • Bulgaria • Romania • ……..

  17. WHAT WE HAVE DONE OVER THE LAST 12 MONTHS: Company rebranding (1/2) Today Tomorrow (QI 2008) Italy Germany Bulgaria

  18. WHAT WE HAVE DONE OVER THE LAST 12 MONTHS: Company rebranding (2/2) WHY UNICREDIT CONSUMER FINANCING (UCFin) • From a (customer) rational standpoint: clarifies the nature of the business (financing) • From a (customer) emotional standpoint: it implies support to realize customers’ projects • Clearly part of UniCredit Group, of which it shares the values • Can be used in all geographical markets and achieve faster visibility and customer recognition • Red vs. orange logo: take on UniCredit Group colour and be more distinctive

  19. Total Revenues 122 mln 145 mln +18.9% Cost / Income 38.6% 36.4% -220 bp Risk provisions -63 mln -48 mln -23.8% Pre-tax profit EVA 12 mln -10 mln 44 mln +9 mln +269% n.m. STRONG BOOST OF ECONOMIC PERFORMANCE OF ITALIAN OPERATIONS HAS ALLOWED TO FINANCE INTERNATIONAL DEVELOPMENT SO FAR 1H06 1H07 y/y ch. Outstanding volumes 4.0 bn 4.6 bn +13.9%

  20. PLAYBOOK 2008 Driver Initiative Country … • 2-3new markets • 1 new business line (Automotive Large Dealer) • Expansion of shops/corners • Capitalia business integration • Central underwriting and collection process • Revised collection strategies • New credit monitoring board • New CVM process and optimization tool • MIS set-up • Customer satisfaction org. & processes • Completion of global CF org. enhancement • Governance, scope of Joint Ventures • Value sharing rules with banks • Bank SLA framework • Standardized 3Y plan cycle • Corporate rebranding New growth initiatives Build up capab. Corporate / Org. enhanc. … + … + … + …

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